Tax help from the Snook

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As some of you may or may not know I am a certified public accountant based out of Massachusetts, USA. With only 9 days until April 15, 2008 (the date US tax returns are due), I figured I would start a thread to help out any poor soul who has a question. As a disclaimer I have to say if the question is too complicated I'm going to have to tell you to consult (which means pay) a CPA to help you. For those too bashfull to post feel free to PM.

 

Well...I already filed my taxes...but maybe you can tell me why I got a refund from Federal but had to pay State?!?!?

At work, the wife and I claimed "single and 0" but filed jointly...which our tax lady told us to do last year so we would get a bigger refund this year...but we ended up paying State $200 *more* than last year. (last year we filed jointly, but I claimed "single and 0" while the wife claimed "married and 1")

Should we change our status so we are both "married and 1" or stick with "single and 0". I really hate paying people...

 

@Kitrax

While not being a Utah expert (as that is the other side of the country) that does strike me as odd as Utah's single tax rate is 5.35%. My guess is that in 2007 you had additional earnings (interest, dividends, capital gains, rental properties, etc.) other than wages as I would assume your employer would withhold at the 5.35%. If you didn't have any significant earnings other than wages, I would contact your human resources department to find out what percentage they are withholding.

 

Very cool of you, Snook.

 

TGS: Fantastic idea and great timing. It may also be helpful if you could point people to the appropriate IRS Publication where the information can be found. I doubt an auditor will accept "but The Great Snook told me this was right in the Whatnots forum on Sorcerer's Place."

My question: I found an error on my taxes and need to submit a 1040X -- what do I need to include as attachments? The problem was failure to include a capital loss on a mutual fund sale in my income. The IRS already has all the 1099's with my previous filing.

 

Not exactly asking for help but thought someone here might be able to give an answer to a question I've been wondering for quite some time, namely why is the American system with taxes so complex? Are people themselves responsible for reporting their taxes rather than the government making the initial report and then individuals are free on making corrections about their income, tax deductions etc. if they like?

In Finland the government issues a tax proposition yearly where your incomes are listed and the amount of tax you are going to pay. If you agree with the proposition you don't actually have to do anything but if something is incorrect or there's something that needs to be added you can make the corrections to the proposition and send it back with the changes.

Also assuming that everyone is responsible for filing in their own taxes is it common to use professional accountants to make the job easier or are most people doing the reporting themselves? It all seems a a bit complex for someone who is not at all connected with accounting.

 

@T2Bruno

When filing a 1040X you need to attach any schedules that changed and how they looked before the change. In your case you will definitely have to attach a Schedule D. You may also have changes on your Schedule A if you itemize and some of your deductions are subject to phasing out due to income limitations. You will not have to resend copies of your W-2s.

At the top of each attachment mark them "As Amended" or "As Originally Filed".

If I can provide code sections I will. You are correct, saying the Snook told you so isn't very authoritative. In your situation it isn't so much a code section as the instructions to the form 1040X. The instructions may mention to also add to the top of each attachment "Do not Process". Most practitioners do not do that, but it can't hurt.

@Morgoroth

I'll give a quick answer, anything more in depth should probably be moved to an "Alley". The filing of taxes is the responsibility of the taxpayer. Employers, banks, etc. send documentation of your activity and earnings to you and to the government which tries to match it to the information you report on your annual filing.

Where difficulties arise is that many people have things that are taxable that are not so clear cut. If you have an unincorporated business it is up to you to keep the records. The same is true for rental properties. When we have politicians who clamor for a flat tax, they always conveniently forget that the people who make the real money (and therefore pay the most tax) don't just get a W-2 (A summary of wage form).

As to doing them yourself or hiring a professional, I of course believe that you should always hire a professional. I am a very smart and highly trained professional. However, I know I cannot practice law, design an airplane, or perform brain surgery For some reason there are plenty of lawyers, engineers, and doctors who think they can do a tax return. I will never understand it

 

Very decent of you, Snook. Two questions:

How do I find out what my RRSP limit is for this year?

What the heck is a CNIL account?

 

@Splunge

You may have to move a couple of hundred miles south for me to be able to answer those types of questions.

@BTA

1. Mutual funds always have a surprise at the end of the year when the stock market goes down. That is because mutual funds are required to distribute their capital gains out to the shareholders. In years that the market goes down, people sell and get out of the funds. This forces the funds to sell their assets and therefore trigger the capital gains. This tends to infuriate people as they probably lost value during the year, and now owe cash to the government.

2. You are correct. In a perfect world you are better off owing the government so you can earn money on the money you owe them. However in many cases it just isn't worth the bother. For example if you get a $10,000 refund how much did you miss out on. If you could find a savings account that paid 5% for the entire year that would earn you $500. Of course the 10K is spread throughout the entire year so it would be $250. Then you would owe taxes on the $250 which may make it $200. For many people they are willing to forego the possibility of earning $200 for the guarantee of not owing the government and getting a nice fat check to pay for their summer vacation (in all probability) or to make a retirement contribution (less likely).

 

BTA, all that is nice and right but come on. We humans dont work that way, for me a tax refund is like free money I didnt expect. Sure in reality it is money I have lended to the state interest free but in my perception it is a nice surprise addition I can blow on something pointless. I think most people view it like that, it is so much nicer.

 

Really good question. It's tax time in New Zealand as well, but 95% of people need to do absolutely nothing, unless their financial affairs are really really complicated. I have never heard of anybody hiring somebody to do their taxes, unless they run a business.

 

haha, harbourboy type in "1040ez" at google & look at what we in the states get as the "easy" form for our federal taxes!

 

I hired an accountant every year except this past year. I used Turbo Tax, and while it was a more time consuming process than going to an accountant, the software really did walk you through everything. I actually got a bigger return this year than I ever had previously thanks to mini-fop!

 

Here in Sweden we have the same system as in Finland. Our employers deduct our taxes directly from our wages and then once a year we get a piece of paper with all hte information which we either accept or adjust depending on our wishes. Darn simple.

 

Joacquin - that sounds like a logical and sensible system to me. The American system seems to have been designed purely to create work for tax accountants.

 

In the Whatnots, indeed, they wouldn’t, but when you point out that it’s now actually in the “Alleys”, they’ll surely consider it seriously.

Back on topic. I just want to say that it’s a very nice thing to do, Snook. I wish there were a Brazilian accountant hiding here to help me out too.

 

i'm pretty sure the answer is no but i will ask any way. if i have more charitable contributions than i can claim can i carry the excess over to next year?

 

Holy CRAP! How complicated is the American tax system. Very few people in this country need to do anything about their taxes either. Thank Allah.